MASCO CORP /DE/ Q4 FY2024 earnings call

• Plumbing: Introduced innovative products like Delta Faucet water filtration, Hansgrohe premium designs, Watkins FreshWater IQ smart system. Sauna360 integration ahead of schedule.
• Decorative Architectural: Behr rated #1 in interior, exterior paint, and exterior stain. Pro paint sales over $900 million (up over 70% since 2020). Completed sale of Kichler Lighting.
• Full Year: Gross margin improved 110 basis points to 36.3%. Operating margin expanded 70 basis points to 17.5%. EPS grew 6% to $4.10. Returned over $1 billion to shareholders via dividends and repurchases.

Plumbing Segment

• Fourth quarter: Sales decreased 1% in local currency; lower volumes in North American trade and retail, but international grew slightly. Operating profit was $200 million, with an operating margin of 16.8% (up 40 basis points).
• Full year: Sales were in line with prior year or up 1% excluding unfavorable currency impact. Operating profit increased 6%, and margin expanded to 19% (up 100 basis points).

Decorative Architectural Segment

• Fourth quarter: Sales decreased 6% due to divestiture of Kichler and currency impact. Paint sales were up mid-single digits, but excluding inventory timing benefit, total paint sales were down low single digits. Pro paint sales were up high single digits, while DIY paint sales were down mid-single digits. Operating profit was $113 million, with an operating margin of 17.7% (up 290 basis points).
• Full year: Sales decreased 5% due to Kichler divestiture and paint business decline. Operating income for the segment was $550 million, and operating margin expanded to 18.5% (up 70 basis points).

• 2025 expectations: Global repair and remodel markets flat to down low single digits. Masco sales expected to be down low single digits, but ex-divestiture and currency impact, roughly flat to up low single digits. Plumbing margins expected 19%-19.5%, Decorative margins 19%-19.5%, Masco operating margin ~18%.
• 2026 targets: Plumbing margin to 20%, Decorative margin 19%-20%, Masco operating margin to 18.5%.
• Capital allocation: Reinvest in business, maintain investment-grade balance sheet, 30% dividend payout, $600 million for share repurchases/acquisitions in 2025.

• China Tariffs: Import ~$450 million from China, 10% tariff would have annualized impact of ~$45 million, but mitigation actions (sourcing, pricing, supplier negotiations) in place. Uncertainty in tariff environment.
• Market Volatility: Uncertainty in global repair and remodel markets; slower-than-expected DIY paint market recovery.

Q: Timing of DIY volume recovery?

A: Dependent on consumer confidence, millennial household formations, age of housing stock, and deferred demand.

Q: How is Masco mitigating China tariffs?

A: Proactively planning via sourcing footprint changes, pricing, and supplier negotiations.

Q: What's driving 2026 margin targets for plumbing?

A: Momentum, productivity, and efficiencies in the plumbing business.

Q: Will China supply chain exposure continue to decrease?

A: Yes, continuing to reduce exposure carefully while protecting quality and delivery.

Q: Impact of PPG architectural divestitures on Home Depot?

A: No significant changes noticed at Home Depot